IRR, MOIC, and DPI each answer a different question about your private investment returns. Here is what each one really tells an LP, and which to trust when they disagree.
When a fund manager sends you an update, there is usually one number in bold at the top: the IRR. It looks like a grade. Most limited partners read it that way, assume it captures how the investment is doing, and move on. It doesn’t. IRR answers one narrow question, and on its own it can make a mediocre investment look excellent.
Private investment performance is measured with a small family of metrics, and the three that matter most to an LP are IRR, MOIC, and DPI. Each answers a different question. Read together they tell you the truth. Read one at a time they can mislead you. Here is what each one actually means, and which one deserves the most weight in the market we are in now.
The shortest way to keep them straight:
IRR, the internal rate of return, is the annualized return that accounts for both the size and the timing of every cash flow in and out of the deal. Because timing is baked in, money that comes back early counts for more than money that comes back late. That is reasonable. It is also exactly why IRR can be flattered. A fund that uses a subscription credit line to delay calling your capital, or that returns a chunk of money early through a refinancing, can post a high IRR without necessarily being a better investment than a fund with a lower one.
A 30% IRR earned over eight months and a 15% IRR earned over five years are not really comparable, even though the first number looks twice as good. Treat IRR as a speed reading, not a verdict.
MOIC, the multiple on invested capital, strips timing back out. It answers a blunt question: for every dollar I put in, how many dollars is the investment worth today, realized and unrealized combined. A 2.0x means your money doubled. The version you will usually see on an LP statement is TVPI (total value to paid-in): total distributions plus the current value of what you still hold, divided by the capital you have paid in.
The multiple rewards absolute gains and ignores how long they took, which is the mirror image of IRR’s blind spot. A 1.8x over four years and a 1.8x over eleven years are very different outcomes for your capital, and the multiple alone will not tell them apart.
DPI, distributions to paid-in, is the one metric that cannot be dressed up. It is simply the cash a fund has actually sent back to you, divided by the cash you have paid in. A DPI of 0.6x means you have received 60 cents back for every dollar invested. Everything above that is still paper. TVPI, in fact, is just DPI plus RVPI (residual value to paid-in), the slice still marked at estimated value inside the fund. Paper value can move. Realized cash cannot.
This gap matters more than usual right now. Distributions across private markets have slowed sharply over the last few years, leaving many LPs cash-flow negative and waiting far longer than their models assumed to see money come back (Bain, Global Private Equity Report 2024). In that environment a fund can carry an attractive TVPI while its DPI barely moves. If you track only the multiple, you will not feel the difference until you need the cash.
Say you commit and pay in $100,000. Over the years the fund distributes $150,000 back to you, and your remaining stake is marked at $30,000. The metrics read like this:
Two funds can show the identical 1.8x here and post wildly different IRRs. A third can match their IRR while having returned almost nothing in actual cash. Same headline, three different realities.
Calculating these three metrics for a single fund is straightforward. Doing it across fifteen or twenty positions, each with its own capital calls, distributions, K-1s, and login portal, is where most LPs lose the thread. The numbers live in separate statements that arrive on different schedules in different formats, so almost no one can answer the simplest question: what is my actual blended return across everything I own.
That gap is a big part of why we built Vyzer. It brings your positions into one place and keeps a live view of paid-in capital, distributions, and current value across every deal and entity, so DPI, TVPI, and IRR become something you can read at the portfolio level instead of rebuilding it by hand in a spreadsheet every quarter.
You do not need to crown one metric. You need all three, because each one hides what the others show. IRR measures how fast your money moved. The multiple measures how far it grew. DPI measures how much has actually reached your account. When they disagree, and in a slow-distribution market they often will, put the most weight on the cash you can actually spend.
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